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About Michael J. Miller

Miller, who was editor-in-chief of PC Magazine from 1991 to 2005, authors this blog for PC Magazine to share his thoughts on PC-related products. No investment advice is offered in this blog. All duties are disclaimed. Miller works separately for a private investment firm which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

Here are Publishers and Online Advertising: Still A Disconnect

Having heard a lot of discussions in the last few weeks about where online advertising is going, both from a media and a technology perspective, I'm convinced that publishers and online advertising executives are both looking at the world through rose-colored glasses. It seems that advertising dollars will continue to migrate to online and to mobile media, but think both sides have expectations that are far too high; and neither side really is looking at it from a consumer viewpoint.

There is no fair share. At both the Jordan Edminston Group conference and the OnMedia conference, one thing I heard over and over again is that online media expects to get its "fair share" of advertising dollars. I heard speaker after speaker reference a presentation from Mary Meeker (then of Morgan Stanley) that says that consumers spend 28 percent of their time on the Internet, but that online media only accounts for 13 percent of advertising spending, resulting in a $50 billion gap. I'm not going to argue with the numbers, but doubt there will ever be an exact correlation between time spent in a medium and advertising revenue.

Online media already gets a much larger percentage of direct response advertising, but much less brand advertising. There's no doubt that online works great for direct response ads--search and more targeted ads result in customers when they are ready to buy. But while brand advertising online will increase, especially in the move to social media, I'm not sure why it would ever be as large as in other media, particularly given the short amount of time most people spend on any particular Web page. That may be even more true in the mobile space: when I'm walking on the street, and need to look up a particular address, I'm not going to stop for a 30-second ad.

Advertisers will pay more or less for each medium depending on what kind of results they see there; and depending on what the competition is. There are hundreds of sports sites online, but only one Super Bowl on TV--even if the aggregate audience is the same, the ad rates won't be nearly as high.

Does content even matter? Publishers and ad networks see the world very differently. Nearly every publisher believes that their content is the most valuable thing. I remember when we used "content is king" as a catchphrase. But advertisers and the ad technology companies--and by extension a great deal of advertisers--believe that the content is more or less irrelevant; what matters is the information about the individual viewer of the page or the site. In other words, if you've searched for a car recently, it doesn't matter if you're on site with detailed car reviews or on a movie gossip site, you're very likely to get a car ad. As one executive of an advertising platform put it, "data is everything ." That's overstating it a bit--you'd still rather advertise a car on a car site--but it does point to a fundamental switch in where you're seeing specific advertising.

Mobile is different, but not that different. Nearly every publisher believes that their content is the most valuable thing, and that consumers will pay for good content. As a long-time editor, I'd like to believe that as well--and like most of you, I certainly pay for a lot of content. As a result, they seem to think that online is an anomaly, and that consumers who are used to free content on their Websites will pay for the same content when delivered in an "app" on a smartphone or tablet. I do believe people will pay more for convenience, but I have my doubts that people will pay as much as they do for print content.

Perhaps the big reason that so much content is free online is that there is just so much content available--and there's enough of a profit that comes from online advertising that sites don't need to charge for content to stay in business. The barrier to entry for mobile content is higher than it is for online content, especially if you realize it will be mostly delivered through an app. But it's certainly lower than the barrier to produce a print product, or for that matter, a broadcast one; and it's getting cheaper all the time, especially as we move toward HTML5. That means there will be more competition for mobile apps and more competition tends to mean lower prices.

Targeted advertising isn't a panacea. At both conferences, it seems like everyone is convinced that targeted advertising is both inevitable and desirable. In some ways, I think they are right--users don't really want to see the same ads over and over again; and advertisers certainly will pay more for getting to people who are actively looking for a particularly product or service. And I do think many people would rather get relevant ads than those that have no connection at all. But almost everyone seemed to be convinced that consumers actually want to be targeted, and I'm not convinced.

I know there's a vocal minority that doesn't want to be tracked at all; but my guess is there are a lot more people who would turn off tracking if it was easy to do so. The advertising community would respond that they don't actually know what individual is tied to which pieces of information, and that without advertising there wouldn't be many free sites on the Internet.

But it's too easy to make those connections and many people are getting more concerned. I wonder how long the data is held, and how much granularity it contains. If I'm looking at restaurant reviews and get an ad for the Zagat guide for New York, that's great; if I'm walking past a particular Starbucks and get buzzed with a coupon for that specific location, that's a bit creepy. Managing that balance is going to be hard.

The advertisers and technology companies all are pretty vocal about saying we don't need government regulations in this area; that the industry can come up with its own rules. They may be right--but they'd better get their act together very quickly, because a couple of bad actors could easily overstep their lines and make regulation inevitable. I'm a bit skeptical that government regulation would solve the problem either--the CAN-SPAM act didn't exactly stop spam. In any case, letting users define how much information the ad networks keep about them is important, but unless the tools are simple enough so people actually feel they have control, it won't work.

In all these cases, the technology providers, the advertisers, and the media need to work together to come up with answers that will work for all of them. But if they fail to take into account consumer needs and wants--including a huge variety of content, simple payment schemes, and basic privacy concerns--none of this will work in the long run.

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